A chemical threat to Michigan’s drinking water that regulators were unaware of and don’t know what to do about. Sound familiar? Thinking Flint and lead in the water? Well, you’d be wrong and it’s not just a Michigan problem.

The chemicals are per- and polyfluoroalkyl substances (PFAS), and they are now a national health concern as they are beginning to show up in all sorts of places including dumps, groundwater, lakes, and drinking water. Michigan has been called “ground zero,” but it is by no means alone.

PFAS chemicals have been used to make cookware, clothes, shoes, furniture, and even food packaging! They are also used in fire-fighting foams. PFAS includes a family of chemicals but currently the focus has been on two of the PFAS chemicals, as we learn more, those concerns may expand. Unlike many other chemicals, there has been little study on the safety of these chemicals. What is known is that, like PCBs, PFAS chemicals are stable (they don’t degrade), they bio accumulate (the higher up the food chain you are, the more you likely have) and they pose remediation challenges because of their stability. Unlike PCBs, they are water soluble which makes them much harder to control. As a result, they are widely found in the environment and are already present in the blood of virtually everyone in the developed world.

Some studies indicate that PFAS chemicals may:

affect growth, learning, and behavior of infants and older children

lower a woman’s chance of getting pregnant

interfere with the body’s natural hormones

increase cholesterol levels

affect the immune system

increase the risk of certain types of cancer

They are a human health and environmental concern but there is little consensus on what levels of these chemicals are safe in your system.

According to the Michigan Department of Environmental Quality (MDEQ), there are more than a dozen communities where PFAS has been detected. Some Michigan communities have been discovered to be using PFAS-impacted groundwater for their drinking-water supply.

In November 2017, Governor Snyder issued executive order (EO) No 2017-4 creating a multi-agency “Michigan PFAS Action Response Team” to, among other things, “make inquiries, conduct studies, consult with federal agencies, and receive public comments.” The State reportedly will test 1380 water systems and 460 schools for PFAS.

In December 2017, the legislature passed PA 201 which, inter alia, included $23.2 million for state PFAS remediation. It passed 109 to 1 in the House and 33-4 in the Senate but that may be a drop in the bucket as more sites are discovered. This spring, MDEQ asked regulated wastewater treatment plants (WWTP) to conduct a screening of their industrial users to identify PFAS sources including landfills that treat their leachate through the WWTP; develop and implement a monitoring plan to evaluate the possible sources; reduce or eliminate PFAS sources; evaluate impacts and submit reports.

The EPA set a lifetime health advisory (LHA) level for two PFAS in drinking water, perfluorooctanoic acid (PFOA) and perfluorooctane sulfonate (PFOS). The LHA level is 70 parts per trillion (ppt, equal to 70 ng/L) for PFOA and PFOS combined, or individually if only one is present. The EPA has not set health advisory levels for other PFAS chemicals. The State of Michigan is using 70 ppt for decision making purposes.

In the absence of federally-enforceable limits, some states are developing their own guidance and enforcement limits. The limits set by the states range from 400 times higher to 5 times less than the current EPA advisory levels.

Litigation over this contaminant has already begun in New York, Minnesota, Michigan and many other states.

For a State that dealt with PBB contamination in the 1970’s, a whole host of contamination issues from the 1970’s until now and then the Flint lead crisis, Michigan seems to have learned its lesson and is jumping on the PFAS problem with both feet but the ubiquity and complexity of PFAS appears to make this the biggest, most difficult and most expensive environmental issue Michigan may have ever faced.

In the hew and cry regarding Nestle and its attempt to withdraw 400 gallons of water per minute (more on that in another post), I’ve seen almost no press regarding two attempts from Wisconsin to withdraw far more than that.

Withdrawals of water from the Great Lakes are governed by the Great Lakes Compact which was approved by all eight Great Lakes states, Ontario, Quebec, and the U.S. Congress, and signed by President George W. Bush in 2008.

The Compact bans the diversion of Great Lakes water outside the basin, with certain exceptions. Two situations allow a community outside the Great Lakes basin, if approved by the States to apply for a diversion when:

A community that is located partially in the Great Lakes basin may apply for a diversion.

A community that is located within a county that is partially in the basin, may apply for a diversion.

Any community applying for a diversion must demonstrate that it has exhausted all available options for getting water. A diversion must be a last resort. Any request for a diversion must be approved by all eight Great Lakes states and so any state may veto the diversion application.

The City of Waukesha, Wisconsin, a few miles west of Milwaukee, is outside the Great Lakes basin but in a county partially in the basin. In 2016, Waukesha applied for a diversion of water from Lake Michigan arguing that the City’s water supply is contaminated with radium, a naturally occurring carcinogen. Waukesha’s application was the first test of the Great Lakes Compact. On June 21, 2016, the eight Great Lakes states voted to approve Waukesha’s diversion request with restrictions. One of the most important conditions that all water diverted from Lake Michigan to Waukesha must be returned, resulting in no net loss of water from the Great Lakes.

People in Michigan are familiar with Foxconn, a Chinese company that briefly toyed with the possibility of locating in Michigan. Instead, Wisconsin made a reportedly $4 Billion offer and Foxconn is locating in Racine, Wisconsin. On Wednesday, April 25th, the State of Wisconsin announced that it would allow a diversion of an average of 7 million gallons a day of Lake Michigan Water. Of that, 5.8 million gallons is to be used by Foxconn whose plant is located in both the Great Lakes and Mississippi River basins. Reportedly, 2.7 million gallons per day will not be returned to the Great Lakes basin, largely because of evaporation.

This diversion does not require unanimous approval under the Compact because less than 5 million gallons per day will be lost.

By way of comparison, the MDEQ’s recent Nestle permit which was the subject of much opposition allows 576,000 gallons of groundwater to be withdrawn and bottled. Oddly, no one in the Michigan press has noticed, yet.

On Tuesday, Gov. Snyder announced a proposal to spend $79 Million annually on brownfield site clean-up, waste management planning, asbestos removal, recycling grants, water quality monitoring and state park infrastructure.

These are all laudable goals – but one has to question – where is the money to come from? The Governor wants to raise a fee on garbage disposal by 1,200%

The Governor asserts that Michigan only recycles 15% of its waste (he’d like it to be 30%) and that “to reduce waste in Michigan landfills” he’d like to increase the “surcharge” currently imposed on landfills from $0.36 per ton to $4.75 per ton. Presently, this surcharge (which was the result of negotiations between the State and industry) provides funds to the State’s Solid Waste Management Fund which helps fund permitting and licensing of landfills and other solid waste management facilities, inspections, permit and license enforcement, monitoring and inspections of landfills and solid waste management facilities. In short, the surcharge pays (along with other fees paid by the industry) for the permitting and regulation of the facilities paying the fee.

One has to wonder why landfills should be paying:

$45 Million each year to remediate and redevelop existing and future contaminated sites which in most cases have nothing to do with regulated and permitted landfills;

$5 Million each year for water quality monitoring grants which definitely have nothing to do with landfills;

$5 Million each year for state park infrastructure which, again, are unrelated to landfills.

Isn’t that why we pay taxes? Shouldn’t those regulated communities pay the costs which have nothing to do with landfills? Also, there is a State superfund law (Part 201) that requires polluters to pay for their pollution.

One can argue that paying $9 Million for local governments’ solid waste planning and $15 Million for grants to municipalities to support recycling should be covered by the State’s general fund, as well, as those functions have nothing to do with regulating those who pay the fee. When you go to get your driver’s license, would you want to be charged an additional $100 to pay for roadside cleanup of stuff like tires and debris? It is tangentially related to driving so, does that make it OK?

There is Michigan Constitutional law that says that the answer is “no” and that this “fee” is a disguised illegal tax being snuck past the taxpayers.

Michigan voters have regularly approved bonds to fund remedial and other environmental expenditures, knowing that it was an investment in our health and economy. Why is Governor Snyder afraid to ask the taxpayers to do so again? Perhaps one word: Flint?

Back in the 1990’s, there was uncertainty about when a cleanup was truly completed – “how clean is clean?” was the question and it seems that those days may be returning – at least for a while.

The MDEQ announced Tuesday that it was rescinding major parts of its May 2013 Vapor Intrusion Guidance which we blogged about when it was published. This 2013 guidance addressed part of the question of how clean is “clean enough” when a brownfield redevelopment or cleanup does not reduce the residual contamination to zero. Vapor intrusion is explained in this link but, basically, it is the threat that some contaminants may migrate upward from soils and groundwater into buildings at unsafe levels. For the last four years, people in Michigan have relied on and been guided by the 2013 Guidance.

MDEQ has been trying for years to update its clean up rules and standards which have been in place for some 15 years. The thought was that new data and studies were available and the cleanup standards which were largely driven by conservative assumptions should be brought up to date. Due to somewhat arcane legal reasons, MDEQ set October 27, 2017, as its date for promulgating these new rules and have been working hard (and continues to work hard) to meet this deadline (the most current version available at the moment can be found here but updates are expected soon).

Review your BEA or due care plan (if you have one); if your site doesn’t have volatile compounds – rest easier. If it does, your BEA might be subject to an EPA evaluation if there is a concern about vapors migrating into occupied spaces – even off-site spaces.

Until MDEQ adopts its new rules, MDEQ will include a standard caveat in approval letters issued moving forward that screening levels used “may not reflect the best available science.” That level of uncertainty may chill many deals and plans under consideration or drive them to more expensive cleanups.

Logically, MDEQ argues that they should similarly update the vapor intrusion standards and include them in the rules package. Vapor intrusion has been in the press a lot recently including this article that discusses 4,000 sites which the State might be looking to address an issue which was thought put to bed or wasn’t simply an issue when the site was granted closed status.

This is where the uncertainty kicks in. MDEQ doesn’t typically address direct human health threats – that would be the State Health Department. The same State Health Department that allegedly missed the Flint Water Crisis and whose director and chief medical officer have been indicted. The State Health Department takes a fairly conservative approach to vapor intrusion and has told MDEQ that its standards are too lenient. MDEQ has developed new hyper-conservative standards that could cause sites which previously passed to now fail.

What is a property owner/developer to do? First, review your BEA and due care plan (if you have one); if your site doesn’t have volatile compounds – rest easier. If it does, it is possible your property might be subject to EPA action if there is a concern about vapors migrating into occupied spaces – particularly off-site spaces. The owner of the site profiled in the MiLive article above found their BEA protection weaker than they had thought and are now dealing with an EPA demand for payment.

For future deals, buyers and lenders may want more aggressive due diligence and cleanup programs to ensure that vapor intrusion is not a risk. This may sideline properties which, until recently would’ve been accepted using the MDEQ’s 2013 Guidance.

Until MDEQ adopts its new rules (which may not take effect until next Spring), the MDEQ will be reviewing and approving requests to approve “no further action” based on current standards but MDEQ will include a standard caveat in approval letters issued moving forward that screening levels used “may not reflect the best available science.” That level of uncertainty may chill many deals and plans under consideration or drive them to more expensive cleanups or site-specific cleanups which require far more and expensive justification.

In prior years, we knew that regulatory and environmental change was coming but we expected it to be slow and incremental. With an unknown quantity like President Elect Trump, one thing is clear – no one really knows what may happen. Here are a few possibilities:

1. Coal/Cleaner Energy Generation – revitalizing the coal industry was part of Mr. Trump’s midwest stump speeches. Will Mr. Trump be able to reverse Barack Obama’s Clean Power Plan? What about the Paris Climate Accord? Certainly, his team is looking at both of those right now. The dispute in Michigan v. EPA, decided in June 2015, continues to rage. In 2015, the US Supreme Court ruled that the EPA didn’t properly justify its rule governing mercury and toxic pollution (MATS) from power plants because it did not specifically address costs at the initial stage of the rulemaking process. In April, the EPA announced it was standing by its MATS rule and concluded that the benefits far outweighed the costs. Petitioners continue to litigate whether the EPA properly evaluated costs. Here in Michigan, new legislation has been passed (and is awaiting the Governor’s signature) intended to encourage additional investment in energy generation and transmission while balancing consumer choice and a greater percentage of renewable energy generation. Will it work? At a reasonable cost?

2. Power Generation Subsidies/Oil/Gas Generation – Mr. Trump’s attacks on “crony capitalism” would seem to mean that he will stop financial incentives for solar and wind generation. Will he also attack oil and natural gas supports in the tax code? Will he open up ANWAR to oil/gas exploration? Will he scale back attempts to regulate fracking? This will be difficult in light of the December EPA Report which concluded that fracking posed problems such as: fracking water withdrawals compete with other water needs; spills of hydraulic fracturing fluids and chemicals or produced water may impair groundwater resources; injection of hydraulic fracturing fluids into wells may allow gases or liquids to move to groundwater resources; discharge of inadequately treated hydraulic fracturing wastewater to surface water resources; and contamination of groundwater due to disposal or storage of fracturing wastewater.

3. Pipelines – will Mr. Trump reverse the Obama administration’s dim view of oil and gas pipelines such as the Keystone XL and Dakota Access Pipelines? How will this affect Michigan where public awareness of two 60+ year-old pipelines under the Mackinac Straits has galvanized both sides of the political spectrum into action. In 2014, Michigan convened a pipeline task force which issued a report in 2015. In September, 2015, the State entered into a written agreement with Enbridge to prevent the transport of heavy crude oil through the Straits Pipelines. The task force also recommended that the pipelines be independently evaluated and that additional financial assurance be provided. The State solicited Requests for Information and Proposals (RFPs) and Enbridge agreed to pay $3.6 Million for the evaluation of the Straits Pipelines. An independent evaluation of alternatives to the Line 5 pipelines is also underway. When those will be completed is not known.

4. Infrastructure – Mr. Trump campaigned on infrastructure (although to hear him tell it, that only encompasses airport quality), and Governor Snyder appointed a 21st Century Infrastructure Task Force which concluded that the State needed to be investing $4 Billion more than it was in infrastructure to address roads, bridges, internet, water, sewer and other infrastructure needs. Given the recent nationally publicized Flint Water debacle, will Michigan find the intestinal fortitude to fully invest in infrastructure or will we continue to patch and delay? Given the State’s recent fight against a federal judge’s order to deliver clean water, and Michigan legislators “default anti-tax setting,” the future does not bode well.

6. Other issues – there are a number of other issues on the horizon including cleanup standards, the maturing of the Great Lakes Water Authority and its ability to deliver clean water and septic services at a reasonable price, Michigan’s effort to reimagine its solid waste program, water withdrawals and protection of the Great Lakes from invasive species and nutrients leading to algal blooms.

Dan Gilbert’s team drafted legislation based on the current Brownfield law. This legislation was moving rapidly through the Michigan Legislature until the Michigan Speaker of the House announced that the House would wait until next year to move the bills forward. While this seems to have killed the bills for now, some are still lobbying for them to become law before 2017.

Articles had appeared in the local papers describing two proposed towers for the Monroe block of downtown Detroit (pictured), These articles include statements that the buildings won’t be built without this legislation being enacted (and presumably implemented in their favor).

The legislation is based on an existing approach – when a project increases property value, the taxes on that increased value can be captured and used to pay for “eligible expenses.” Typically, these TIF (tax increment financing) programs put the risk of failure on the developer (where it belongs) while they increase the potential return by reimbursing the developer for expenses it would otherwise absorb. The current brownfield law allows communities to issue bonds and pledge their full faith and credit, but in the brownfield “universe” that almost never happens.

The brownfield TIF law allows reimbursements for cleaning up contamination and taking protective measures and, in more urban communities, for costs of site preparation and infrastructure improvements. This State, like many others, has decided that these incentives are necessary to entice developers to take desired risks. This is nota tax credit, nor, do the taxpayers of the State front any money to the developer. If the development does not result in the increase in taxes expected, the developer loses. Without a bond, if there is no tax increment, the community/state owes the developer nothing. Further, the community is held harmless because the predevelopment property taxescontinue to go to the government as they did before project development. In short, this is a kind of “deferred gratification” for the taxing authorities as they must wait until the developer is repaid to get taxes on the increased property values (certain taxes are exempted from the TIF program and so there is some immediate benefit to the community).

So what’s the fuss about the Gilbert legislation? These bills take the Brownfield TIF and put it on a massive dose of steroids. In addition to capturing real property taxes, the Gilbert team proposes to capture both income taxes andsales taxes generated on a property following its redevelopment, if the project is “transformational.” This legislation vastly broadens the eligible expenses which can be reimbursed. Instead of covering only environmental cleanups, environmental due care and communal benefits like infrastructure, the Gilbert legislation would allow a developer to be reimbursed for all of its construction costs. This is bold and would almost certainly lead to new, riskier developments. A developer could wind up with a significant competitive advantage because his costs are could be fully reimbursed. This could allow such a developer to undercut the market or amass significant profits. The potential for market distortion appears to have been overlooked by the few commentators who have spoken on the subject.

The legislation includes a cap on the number of such transformational projects per year and per community and with a maximum of $50 Million in the first year’s capture for new projects. It is tiered so what is transformational (based on a dollar amount) varies based on the size of the community. This was a sop to smaller communities to get their support for this legislation as was a provision putting funds into the State’s Brownfield revolving fund. There are also some exemptions from the spending requirements including one that seems directed right at Flint.

“Transformational” can mean many different things but the legislation’s focus is whether a project will transform local economic development, community revitalization, growth in population, commercial activity and employment.

The legislation received little notice until recently. Interestingly, it has been criticized by those on the left and on the right. A Free Press column calling this legalized “serfdom” for employees seems over-the-top. Yes, taxes will be collected and ultimately reimbursed to the developer. I don’t see that equaling employee slavery. The Mackinac Center piece is a bit closer to the mark. They complain of “crony capitalism.” The fact that only a few developers can get these projects approved per year and one per community per year does seem like the sort of favoritism inherent in crony capitalism. Further, the fact that the projects are limited to extremely expensive ones (on a range between $15 Million and $500 Million depending on county population), again, seems to mean that only the elite get benefits that are not available to the ordinary developer. In that regard, as the Mackinac Center points out, this is no different than any TIF financing model (and there are many of them in use throughout Michigan and the US). This is the world we live in as evidenced by President-Elect Trump’s efforts to keep a Carrier plant in Indiana.

The capture of sales and income taxes would be new to Michigan and would put Michigan in the minority of states that allow such capture.

What has not been commented on is the need for a mechanism to ensure that the taxpayers of the State of Michigan are held harmless – so that the income and sales taxes to be captured are truly new to the State and not the result of a business moving its operations from one place to another. This mechanism (and others needed) are to be developed later. This is a practical consideration with large implications. The State’s review of this legislation thus far includes an admission that the Legislature has no idea how much this might actually cost the State in revenue if it passes as is.

Will this package of bills pass? I expect it will. If not this month, then early next year. If the Legislature doesn’t address some of the concerns expressed above, we may find ourselves with some major projects and some unintended consequences not too far down the road.

It seems the whole Country is talking about Flint. There is justifiable outrage about the process, the horrible impact on the community and the failures to detect and swiftly respond to the Flint water crisis. There has been a lot of finger pointing about who is responsible but little discussion about preventing this from happening again (as Governor Snyder promised). Here are seven questions that I think people will,or should be, thinking about as the initial furor dies down:

1. Was using Flint River water a bad idea or a good idea that went horribly wrong? The Flint water crisis was a failure of execution. The Flint River was known to be a poor quality water source but that doesn’t mean that the decision to switch to the River was wrong from the start. Without getting too far down the blame game – it is clear that in June of 2013 (almost 9 months before the water switch), the then-Emergency Manager hired an engineering firm to figure out how to manage the Flint River water. There has been, to my knowledge, zero discussion of what that firm, Lockwood, Andrews & Newnam, did or what they were qualified to do. Had they done their job properly and advised the City and Emergency Manager properly, either Flint would’ve not made the switch or would’ve treated the water properly. I expect that there will be hearings about this eventually.

2. Who should be preventing such problems? In short, the EPA, the MDEQ, the Michigan Department of Public Health and the local government. Governor Snyder’s own Task Force concluded that the MDEQ dropped the ball – stating that there was: (1) a culture of minimalist “technical compliance” that failed to focus on the intent of the laws MDEQ was charged to implement; (2) a failure to respond in both substance and tone to the public’s concerns; (3) a failure to understand the federal lead and copper rule, particularly focusing on optimizing corrosion control – reportedly MDEQ told Flint that treatment for corrosion control was not needed until after two six month monitoring periods had been completed.

Allegations that MDEQ dropped bad results from its water testing seem to reflect the Governor’s Task Force’s concerns and, along with allegations that the Michigan Health Department hid lead health data, may lead to criminal charges. Reports that both the Michigan Attorney General and the federal Justice Department are investigating may be leading some to have sleepless nights.

The EPA also bears responsibility – they recently (and almost certainly in response to Flint) released this Memorandum clarifying the requirement of corrosion control for communities with 50,000 or more residents. Larger still is the assertion that EPA staff knew before June of 2015 that Flint wasn’t using required corrosion control and that a staff memo on the topic was buried. On January 21, EPA issued a fairly scathing letter and emergency order to the State and City and so, “working together” seems a bit far off.

Both the State of Michigan and the EPA have established task forces and working groups looking at the causes of, and responses to, the Flint situation -my question is will there be correction at the agencies and better communication between them or will nothing change?

3. What about the rest of the State? The Flint situation has further weakened the public’s trust in government’s ability to protect them. Will this lead to people in Detroit, Lansing, Grand Rapids and elsewhere to question if their water systems are protective of human health? Given that the nascent Great Lakes Water Authority (which serves almost half the State’s residents) is just getting off the ground and its system has parts dating back to the 1800s, will there be additional testing and assurances given that the tap water we all thought was safe really is? For your information, here is a 2014 DWSD report that reflects “acceptable” amounts of lead in Detroit’s drinking water at taps they evaluated.

4. How to improve governmental transparency? Governor Snyder released 274 pages of emails and, for the most part, my review reflects that the Governor was out of the loop until late September of 2015 and then, he began to mobilize the State to respond. Why it took until January for him to issue a disaster proclamation and seek Federal aid is not clear. The Governor could have stonewalled on his emails but in the face of public pressure, he released them. Some have made hay out of the fact that he did not release his 2013 emails – when the decision to switch the water source was made. I doubt there’s anything there but agree that he should release those as well. One thing that should come out of this is an amendment to Michigan’s Freedom of Information Act to remove the blanket exemption from the Governor and his aides. In the interest of good government, the inner workings of the highest levels of the administration should be open to the public as much as the inner workings of any of the State’s agencies. Michigan is only one of two states to have such a blanket exemption and I think it’s time for that to change.

5. Will Michigan change the Emergency Manager law? Many on the left have castigated the Governor for the Emergency Manager law he championed, arguing that it is unfair and improperly denies the public their voting rights and right to elected representation. While I am not going to debate that here, it appears that the Flint Emergency Managers (there were several of them during the time in question – itself a problem) operated in an informational vacuum. This letter from the Emergency Manager in March of 2014 reflects a decision to use the Flint River rather than Detroit Water and appears to have been made without public consultation or comment. I can see calls to change the law here based on Flint’s experience. Certainly, better oversight of Emergency Managers is a must.

6. What about the infrastructure? Governor Snyder announced that he is convening a commission to study Michigan’s infrastructure needs, threats, opportunities and costs. The commission will be charged with recommending action items and investments to protect our health and well-being. Top priorities will include: water and sewer infrastructure, energy and electrical grids, broadband modernization, and upgrading the aging Soo Locks. The commission will lay the groundwork for state and municipal actions to take place. Bluntly, this is long overdue and, candidly, given how poorly Michigan’s recent road funding process went, I’m dubious about whether this will make a difference with our State Legislature. This needs to be the State government’s number one priority. However, given the political damage Governor Snyder has suffered, it seems that a program of major infrastructure investment is a long shot – necessary but unlikely. Will our “fix on failure” approach continue? Given that estimates to fix the Flint water system run to $60 Million Dollars (or more), and the Detroit/Great Lakes system into the hundreds of millions, if not billions, do we have the intestinal fortitude to invest in the future and in our health and that of our children? Do we need to replace the lead pipes or is it acceptable to rely on corrosion control treatment?

7. Will anyone going to jail? Many people have said “this is criminal” and under federal and State law, prosecutors will be looking to see if there was “reckless disregard of the consequences,” “gross negligence” or an “intentional failure to obtain or follow proper regulatory approval or direction” which may lead to possible criminal charges. The failure to use corrosion control seems a likely focal point as it might satisfy one or more of the above standards – but the facts still need to come out. It seems that the strongest argument for criminal charges may be the altering of reports or data, covering up the lead results or obstructing the investigation. Certainly, civil lawsuits will abound (and have begun) and civil penalties may be imposed but, generally, making a mistake, even one of this gigantic magnitude with these horrendous consequences is unlikely to support a criminal conviction. That’s why we have ballot boxes.